nat gas for power generation @ record high (EIA)

[k1f]

http://www.eia.gov/naturalgas/weekly/ar ... /index.cfm

Consumption of natural gas for power generation (power burn), which has been very high throughout 2016, recently hit its highest daily level on record on July 21, reaching 40.9 billion cubic feet per day (Bcf/d). Power burn surpassed the 40 Bcf/d threshold on three separate days in late July as widespread hot weather led to strong demand for air conditioning. According to PointLogic data, nine of the ten highest power burn days on record occurred in July 2016, and one was in July 2015. Natural gas consumption for power generation in July averaged 36.1 Bcf/d, according to PointLogic data. This is 2.7 Bcf/d higher than July 2015 and 1.5 Bcf/d higher than the previous high from July 2012.

Increases in power burn, as well as record high storage levels at the start of the injection season and slowing production, have supported relatively low net injections of natural gas into underground storage facilities this summer. Net injections have fallen short of both last year's levels and the five-year (2011-15) average for most weeks this summer, according to EIA's Weekly Natural Gas Storage Report. For the week ending July 29, inventories posted an overall net withdrawal for the first time in 10 years in the summer months. While positive net withdrawals are very common in the South Central region in the summer, they are usually offset by positive net injections in the other four storage regions. During the most recent storage report week, no part of the Lower 48 states was immune to heat, as highs reached into the 90s throughout most areas of the country.

Low natural gas prices and growth in natural gas power generation infrastructure are the main driving factors behind this summer's growth in natural gas use. While the summer season is generally the time of year when power burn is highest, because of air-conditioning demand, gas consumption for power generation has also been rising in the winter, as natural gas makes up a larger share of baseload generation.

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Storage:
U.S. posts first summertime weekly net withdrawal since 2006. Net withdrawals from storage totaled 6 Bcf, compared with the five-year (2011-15) average net injection of 54 Bcf and last year's net injections of 41 Bcf during the same week. This is only the third time ever that net withdrawals from working gas stocks were reported on a national basis during the summer months. The two other summertime withdrawals both occurred in 2006 (July 21 and August 4), which predates the new five-region format of EIA's WNGSR that was introduced in 2015. Working gas stocks total 3,288 Bcf, 464 Bcf above the five-year average and 389 Bcf above last year at this time. The net withdrawal on the national level resulted from two key factors: relatively small injections in the East and Midwest regions and large withdrawals from storage in the South Central region. The Pacific region also reported a net withdrawal of 4 Bcf for the week.

South Central region posts largest summertime weekly net withdrawal on record. Withdrawals from storage in the South Central region totaled 26 Bcf, owing to strong cooling demand for natural gas in the region. This is the largest withdrawal reported in the history of the five-region storage estimates, which have data back to January 2010. At 26 Bcf, net withdrawals this week in the South Central region also topped the summertime record for the predecessor region in the old three-region format (the Producing region).

The East and Midwest regions posted the smallest summertime net injections since 2012. Net injections in the Midwest and East regions totaled 24 Bcf. In 2012, total injections in the regions totaled less than 24 Bcf three times during the summer months, reporting withdrawals of 20, 23, and 20 Bcf in successive weeks during the three-week period from July 6-20 in that year. The Midwest region reported net injections of 10 Bcf–the lowest ever reported since 2010.

Stock change is at the lower end of analyst expectations. Despite the highly unusual summertime withdrawal from storage, the weekly stock change fell within the range of expectations as some analysts called for the withdrawal. The expected stock change for the week generally ranged from withdrawals of 6 Bcf to net injections of 10 Bcf. Bloomberg reported a median net increase of 3 Bcf. Net withdrawals for the week totaled 4 Bcf according to pipeline scrape data collected by PointLogic Energy. Prices for the Nymex futures contract for September delivery at the Henry Hub rose about 4¢/MMBtu to $2.88/MMBtu, with 1,026 contracts traded at the release of EIA's WNGSR. Prices drifted back down in subsequent trading, reaching the pre-release price of $2.84/MMBtu within two minutes of the release.

[dan_s]

By the end of September, natural gas in storage should be close to the 5-year average.